Roged, Inc. v. Paglee

Singley, J., delivered the opinion of the Court. This appeal, from two orders of the Circuit Court for Anne Arundel County, was entered in the Court of Special Appeals. We granted certiorari before the matter came on for hearing in that court. The genesis of the dispute came about when Edgar H. Paglee and Roger D. Bonney, each the owner of 50% of the stock of Roged, Inc. (Roged, or the Company), a company engaged in the business of selling and leasing materials handling equipment, had serious disagreements with respect to the management of the Company. 1 In November, 1974, Paglee filed a bill of complaint in the Circuit Court for Anne Arundel County against Roged, its officers and directors (except Mrs. Paglee) and one employee for the dissolution of Roged and for injunctive and declaratory relief.

Injunctive relief was granted Paglee, pending trial of the case, which was scheduled to begin on 21 April 1975. When the case came on for hearing on an amended bill of complaint and answer, counsel agreed to the entry of the following consent decree: “It is this 21st day of April, 1975, by the Circuit Court for Anne Arundel County, with the concurrence of all parties as indicated by the signatures of their respective counsel, ²⁵¹ “ORDERED, that these proceedings shall forthwith be referred to the Court Auditor for determination of the current value of the one hundred (100) shares of stock of plaintiff, Edgar H. Paglee, in Roged, Inc. in accordance with the following criteria: “1. The value of the stock shall be determined as if dissolution of the corporation had been decreed on April 21,1975. “2. All of the ‘commission backlog* of Roged, Inc. found to exist on April 21, 1975, as well as the proceeds, if any, of sealed bids submitted by Roged, Inc. on or before April 21, 1975, shall, for the purposes of the Auditor’s account, be considered as an account receivable of Roged, Inc. “3.

The accounts receivable stated above in paragraph 2 shall be reduced by the Auditor by reason of any applicable federal and/or State taxes to be paid by Roged, Inc. on said accounts receivable, as well as the proper amount allocable as the cost of administering said accounts receivable to a successful conclusion, said cost of administration to be determined by past costs of administration and/or current costs adequately demonstrated to the satisfaction of the Auditor. “4. The Auditor, in determining the current value of plaintiffs stock, shall also consider (upon information to be submitted in letter form to the Auditor by counsel of record) and pass upon the necessity, legality, and validity of the following expenditures heretofore made by Roged, Inc.: “(a) Payment of counsel fees and expenses of litigation of all named defendants by the corporation. “(b) Purchase from corporate funds of the premiums on life, major medical, and income protection policies on behalf of defendant, Roger D. Bonney. ²⁵² “(c) Payment by the corporation of any salary in excess of $2000.00 per month to defendant, Roger D. Bonney. “5. The Auditor, in determining the current value of plaintiffs stock, shall also consider (upon information to be submitted in letter form to the Auditor by counsel of record) and pass upon the issue of whether or not either of the following are legitimate accounts payable of Roged, Inc.: “(a) $11,460.00 ‘advance commissions’ to Litton Unit Handling Systems. “(b) Approximately $1,900.00 ‘advance commissions’ to Elliott Manufacturing Company. “AND, IT IS FURTHER ORDERED that defendants, Roged, Inc. and Roger D. Bonney, shall, commencing April 22, 1975, set up a separate trustee account in which the accounts receivable set forth in paragraph 2 above shall be deposited when and as received; and “IT IS FURTHER ORDERED that defendants, Roger D. Bonney and Wayne F. Byrd, shall promptly and from time to time furnish to the Court Auditor (with copies to counsel for plaintiff) any and all corporate records or information required by the Auditor to properly state his account, and “IT IS FURTHER ORDERED that defendant, Roged, Inc., shall be allowed to continue doing business, and that, commencing April 22, 1975, defendants, Roged, Inc. and Roger D. Bonney, shall set up and maintain separate books of account for all business and income generated from and after said date, and “IT IS FURTHER ORDERED that the injunction previously issued in these proceedings shall remain in full force and effect pending a final decree from this Court, and “IT IS FURTHER ORDERED that defendant, ²⁵³ Roger D. Bonney, shall forthwith submit to this counsel a listing of all pending bids, the name of the manufacturer, the agency to which the bid has been submitted, and the date on which the bids are to be opened, and “IT IS FURTHER ORDERED that the value of plaintiffs stock, as finally determined by the Auditor, shall be reduced to final judgment as of April 21,1975, and “IT IS FURTHER ORDERED that, upon the passage of a final decree in these proceedings, plaintiff, Edgar H. Paglee, shall place his stock certificate in escrow with William A. Franch, Esq., until said stock is finally redeemed by the corporation or its designee at the value stated by the Auditor and ratified by this Court.” In September, 1975, the Auditor filed his report which determined that Paglee’s stock, at 21 April 1975, had a value of $33,138.35. Exceptions were filed in behalf of Roged and the individual defendants, as well as by Paglee.

After a hearing on the exceptions, the chancellor (Childs, J.) remanded the case to the Auditor for a restatement of his account, and after further hearings, an order was entered on 14 May 1976 determining that the value of Paglee’s stock at 21 April 1975 was $41,191.18, to which should be added interest and costs. A monetary judgment was entered in Paglee’s favor against all defendants in that amount. The defendants then moved for a review of the consent decree of 21 April 1975 and the order of 14 May 1976, which was denied on 29 June 1976, after hearing by another judge (Hopper, J.) of the same court. It was from the orders of 14 May 1976 and 29 June 1976 that this appeal was taken.

It seems that Roged and the individual appellants concede that the initial determination of the court Auditor that Roged had a net worth of $28,169.84 on 21 April 1975 is correct. They challenge, however, the adjustments made by the Auditor and the court to reflect the provisions of the ²⁵⁴ consent decree. 2 In support of this they mount a many faceted attack, which we shall consider in the order presented. (i) The court erred in not allowing the taking of testimony on the ambiguity in construction of the consent decree. At the outset, it must be recognized that the consent decree was the product of negotiations between the parties.

It is well settled that Maryland follows the objective test in the interpretation of contracts, Billmyre v. Sacred Heart Hosp., 273 Md. 638, 642-43 , 331 A. 2d 313, 316-17 (1975); Kasten Constr. v. Rod Enterprises, 268 Md. 318, 327-29 , 301 A. 2d 12, 17-18 (1973); U.S.I.F. Triangle v. Rockwood Dev. Co., 261 Md. 379, 383-84 , 275 A. 2d 487, 489-90 (1971); Slice v. Carozza Prop., Inc., 215 Md. 357, 368 , 137 A. 2d 687, 693 (1958) and that the application of this test means that where the language is plain and unambiguous, there is no room for construction, and it must be presumed that the parties meant what they expressed: not what the parties intended the contract to mean, but what a reasonable person in the position of the parties would have thought it meant, Kasten Constr., supra, 268 Md. at 328-29 . We have extended this principle to the interpretation of judicial decrees, Monticello v. Monticello, 271 Md. 168, 173 , 315 A. 2d 520, 523 (1974), cert. denied, 419 U. S. 880 (1974). See Rosher v. Superior Court, 9 Cal. 2d 556, 560 , 71 P. 2d 918, 920 (1937).

We find nothing ambiguous in the decree. If, as Roged contends, it failed to provide for certain contingencies, this was a void to be filled by the draftsmen, not by the courts. ²⁵⁵ (ii) The court below erred in disallowing, for valuation purposes, the expenditures made by Roged for legal fees in behalf of all of the defendants. Maryland Code (1957, 1973 Repl. Vol.) Art. 23, § 64 (now Code (1975), Corporations and Associations Article § 2-418) contain provisions governing the indemnification of the officers, directors and employees of a corporation.

Generally speaking, subsection (d) of the former,